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New Dynamics in China-Iran Trade Under Sanctions

New Dynamics in China-Iran Trade Under Sanctions

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January 2019 - 12 Pages

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Executive Summary

A review of trade data from the General Customs Administration of the People’s Republic of China shows that China-Iran trade has fallen dramatically in the two months following the reimposition of US secondary sanctions. Chinese exports to Iran have collapsed from about USD 1.2 billion in October 2018 to just USD 391 million in December 2018—a fall of nearly 70 percent.

Looking to trade data and recent developments, this paper suggests that China may be abandoning the policy of sustaining trade with Iran in direct contravention of US sanctions, introducing both economic risks in regards to Iran’s continued industrialization and political risks in regards to Iran’s continued compliance with the JCPOA.

If China remains unwilling or unable to sustain trade ties with Iran in the face of US sanctions, the  consequences in Iran will prove significant. While pressures were expected in Europe-Iran trade, the addition of pressures stemming from China will further weaken Iran’s economy. The slowdown in exports of food, medicine, and consumer goods from Europe will contribute to inflation, while the slowdown in exports of machinery and equipment from China will lead to decreasing production and layoffs in the manufacturing sector. A recent survey of members conducted by the Tehran Chamber of Commerce identified that 72 percent of enterprises expect to business conditions will worsen for their firm over the coming year.

To the extent a change in policy in Beijing will contribute to layoffs across Iran in the coming months, the trajectory of China-Iran trade may prove more consequential than Europe-Iran trade for Iran’s ability to remain in the JCPOA.

 
 
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